Summertime is synonymous with fun, relaxation, and making memories. Whether you’re taking an adventure-filled family vacation, hosting epic backyard barbecues, or embarking on spontaneous road trips, the possibilities are endless. There’s only one thing standing between you and your dream summer – finances.

All these excursions come with price tags that can add up to a hefty amount. Luckily for homeowners, there’s a simple solution – a Home Equity Line of Credit (HELOC). With rates substantially lower than traditional credit cards, you can turn your summer dreams into a reality – without breaking the bank.

 

What is a Home Equity Line of Credit?

Home equity is the portion of your home’s value that you truly own. It’s calculated by subtracting your outstanding mortgage balance from the current market value of your home.

Home Equity = Current Market Value of Home – Mortgage Balance (Amount Owed)

A Home Equity Line of Credit, or HELOC, is a revolving line of credit that allows you to borrow against the equity you’ve built in your home. A HELOC differs from a traditional home equity loan in that you can borrow funds as needed, up to a predetermined limit at the time of approval. You only make payments and accrue interest when you borrow from your credit line. It functions in the same fashion as a credit card.

 

The Benefits of a HELOC

While a HELOC might not be the first financing option that comes to mind regarding your summer plans, it’s worth considering. There are many financial perks that come with tapping into your home’s equity.

• Flexibility: A HELOC provides the flexibility to access funds as needed. With a predetermined credit line, you can borrow whenever the time arises. This feature makes it an ideal option for expenses that may vary in timing, such as vacations, home remodels, or other summer excursions.
• Lower Interest Rates: Home equity loans are secured loans that use your home as collateral. Consequently, the interest rates on HELOCs are usually much lower than traditional credit cards – allowing you to spend less on interest charges and more on summer fun.
• Higher Borrowing Limits: Depending on the amount of equity in your home, you could unlock substantially more funds than through a personal loan or credit card. 

 

Planning Your Summer Finances with a HELOC

Before taking the plunge, it’s important to map out your summer spending. Follow these steps to ensure a HELOC is right for you:

• Assess Your Financial Needs: Take stock of your anticipated summer expenses, including vacations, home improvement projects, summer camps, and any other seasonal costs.
• Determine Your Available Equity: Calculate the amount of equity you have in your home and determine how much you would need to borrow with a HELOC. It’s important to note that you typically cannot borrow the full amount of equity in your home. Each lender has their own policies and requirements. For example, you might be able to borrow up to 80% of your available equity.
• Make a Budget: Create a budget for your total summer spending and indicate which expenses will be covered by the HELOC and which you can cover with existing funds. Take time to consider how everything fits into your overall financial plan.
• Create a Strategy: Develop a strategy for how you plan to repay the borrowed money. Make sure you consider factors like interest rates, loan repayment terms, and how comfortably you can manage the payments.

 

Smart Ways to Use a HELOC this Summer

Once you’ve secured your HELOC, here are some ideas for how you can put those funds to use this summer:

• Finance Your Dream Vacation: Whether you’re dreaming of a tropical getaway or a fun-filled road trip, you can use your HELOC to cover travel expenses and focus on making memories that will last a lifetime.
• Invest in Home Improvements: Knock out those projects that have been waiting on your to-do list, such as repairs and renovations. You can use a HELOC to cover the costs of hiring contractors or fund your own DIY ventures.
• Cover Seasonal Expenses: Use your HELOC to cover seasonal expenses like property taxes, summer camp costs, upcoming tuition payments, or any other financial obligations that typically arise during the summer.

 

Tips for Responsible Borrowing

A HELOC is a valuable financial tool. However, it’s crucial to remember that it’s still a loan, and your home is used as collateral. The last thing you ever want to do is risk losing your home over frivolous spending. While HELOCs come packed with financial perks, they must also be used responsibly.

• Borrow Only What’s Necessary: Resist the urge to borrow more than you need. Just because you’re approved for a $25,000 HELOC, that doesn’t mean you need to borrow that much. If you’re worried that you’ll be tempted to overspend, ask to be approved for the specific amount you need – nothing more.
• Pay on Time: Stay on top of your payment schedule to ensure you don’t miss any payments and damage your credit score. Consider enrolling in automatic payments so you never miss a due date.
• Monitor Your Payments: Remember, HELOCs function similarly to credit cards. As a result, the more you borrow, the more your monthly payments will become. Keep an eye on how much you’re borrowing to ensure the payments stay within your monthly budget.

 

We’re Here to Help!

Using a HELOC to finance your summer plans can provide the flexibility and convenience you need to make the most of the season. Yes, many financial perks are included with a HELOC; however, it does use your home as collateral. To unlock the full potential of this financial option, ensure you use these funds responsibly.

If you want to learn more about our Home Equity options or are curious about how much equity is available in your home, we’re happy to help. Please email us or give us a call today!